Toshiba to halt HD/DVD production, shift to semiconductors

Filed on February 19, 2008

TOKYO - The Japanese electronics firm Toshiba decided to completely withdraw from its HD/DVD project and shift focus to semiconductor production, which the company considers its mainstream business.

Toshiba’s announcement on Tuesday revealed its plan to immediately stop development and production of high-definition DVD players and recorders, and halt sales of the technology by the end of March.

Pullout from the HD/DVD sector was a ‘very tough decision,’ Toshiba President Atsutoshi Nishida told a news conference in Tokyo Tuesday. ‘Continuing with the business would further affect earnings.’

The company’s decision came as most software retailers and movie distributors have shown exclusive support for the rival Blu-ray standard promoted by Sony Corp and other electronics makers.

Hollywood film studio Warner Brothers’ shift to Blu-ray affected Toshiba’s earnings and led the electronics company to bow out of the competition with rival Sony, Nishida said.

Along with Warner Brothers, Metro-Goldwyn-Mayer Studios, Sony Pictures, Twentieth Century Fox and Walt Disney joined the Blu-ray camp. Netflix, the online DVD rental leader, has also announced its plan to shift to Blu-ray.

Last week, the world’s largest retailer WAl Mart said it was shifting sales exclusively to the Blu-ray system, following similar moves by Best Buy, the largest US consumer electronics chain.

The pullout from the HD/DVD sector was expected to cost the company more than 1 billion dollars.

Toshiba shares rose Monday to a seven-week high on Tokyo markets on speculation it would abandon the HD/DVD technology.

Toshiba has sold about 1 million recorders, players and computer disks with the HD/DVD format worldwide, including 600,000 to 700,000 in the US and Europe, the Japanese business daily The Nikkei reported.

Toshiba said it intends to take back 100,000 units from dealers, while it will continue providing consumers with after-sales services for its HD/DVD products.

The Blu-ray Disc and the HD/DVD are formats for high-definition videos, but both have faced an uphill fight for consumer acceptance.

Toshiba said it would expand its semiconductor production by jointly investing 1.8 trillion yen (16.7 billion dollars) with its US partner SanDisk Corp in its production of NAND flash memory chips for mobile phones and digital cameras.

Toshiba, the second-largest NAND flash memory maker, plans to build two new plants by March 2009.

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